EU Supports Monte Paschi under Tougher Conditions
European Union and Italy have agreed to bailout Banca Monte dei Paschi di Siena under stricter conditions. The third largest bank in Italy will have to undergo massive cost cuts. Economy Minister Fabrizio Saccomanni expressed that the Italian bank will have to reduce large government bond holdings to get state help.
European Competition Commissioner Joaquin Almunia told that EU is expected give green light to state help for Monte Paschi within two months. Monte Paschi will undergo restricting plan and will have to cut operational costs.
Monte Paschi, the oldest bank in the world was earlier planning to increase its capital by 1 billion euro. The bank will now have to raise more capital, as high as 2 billion euro, as per the resolution reached between EU and Italy.
Monte Paschi holds government bonds worth 29 billion euro as per the data available during June 2013. Monte Paschi has already received 4.1 billion euro from state funding. The bank posted loss of 279 million euro in second quarter. The bank pays 9 percent interest on the bonds sold to the government. Monte Paschi will also have to decrease its public debt portfolio as per the new restructuring plan.